Monday, June 04, 2007

Hospitals as they now exist are doomed?

The April 2007 edition of the "Managing the Margin" newsletter published by the Healthcare Financial Management Association includes an interview with author Michael Rindler who has written a book "Strategic Cost Reduction: Leading Your Hospital to Success."

Rindler states in the interview that "physicians and clinics are taking...profitable services for themselves and moving them out of the hospital into their physician or office setting." Based on that, his thesis is essentially that hospitals to stay financially viable have to focus on cutting costs, because hospitals essentially won't be able to stop the trend of medical procedures being performed in buildings that are not owned or operated by hospitals.

The creation of doctor-owned medical facilities has been a response to the cost-cutting efforts of hospitals which led to decreases in doctor pay. In my view the concept of the doctor-owned medical facility makes sense because the economic incentives of both the facility owner and the service provider are aligned due to the fact that owner and provider are the same entity. In addition, this concept would result in reduced complexity of paperwork because patients would get a reduced number of bills.

If each set of doctors in particular specialties nationally withdrew from hospitals and set up independent medical facilities, there would be little revenue left for a "hospital" as we know it in the traditional sense. A key question is what medical benefit lies in having all of the different medical equipment and activity located in the same facility...a subject for another post...